CM Callow v Zollinger, Reconceptualized Through the Tort of Negligent Misrepresentation

Abstract

This article argues that CM Callow Inc v Zollinger was wrongly decided, and that the Supreme Court of Canada unnecessarily expanded the duty of honest contractual performance established in Bhasin v Hrynew. In this decision, the Supreme Court applied a contract law analysis to a fact scenario that did not entirely call for it. This is to say that the contract that Mr. Callow hoped to incentivize through freebie work never came into existence, so it should not have been assessed through the lens of the duty of honesty. This article argues that this approach was erroneous, given Canadian contract law’s strong stance against imposing pre-contractual duties of good faith. While the article agrees that the duty of honesty was applicable to the ongoing contract between Mr. Callow and Baycrest, it submits that the tort of negligent misrepresentation should have addressed Baycrest’s statements in relation to the potential future renewal. Such an analysis would have allowed for greater clarity in Canadian contract law, and it would have allowed for a more pronounced dividing line between contracting parties’ disclosure obligations and the duty of honesty. As a result, this article predicts that the Supreme Court’s decision will perpetuate confusion in the law pertaining to good faith and contracting parties’ disclosure obligations. Further, this decision is likely to have a chilling effect on contracting parties’ communications, given the justified fear of painting a misleading picture for the other side vis-à-vis potential future endeavours.